Implications of FAAC, NNPC face-offs on economy, others

Over the years, the Federation Accounts Allocations Committee (FAAC) and the Nigeria National Petroleum Corporation (NNPC) has always clashed over discrepancies in remittances by the Corporation.
However, with the latest spat by both parties, it does appear it is the economy that will suffer; BENJAMIN UMUTEME writes.

The chairman, Forum of Finance Commissioners, Mahmoud Yunusa, once said “The Nigeria National Petroleum Corporation (NNPC) is a major driver of the economy; that is why there is much focus on the Corporation.” On June 27, 2018, the Federation Accounts Allocations Committee (FAAC) was again inconclusive.
On July 11, it was also stalemated after the federal and state governments rejected the money remitted by the NNPC.
This was after it was called off the previous week because “there was no money to share.” This latest stalemate brings to five the number of times the monthly FAAC meetings failed to hold this year.
The Federation Accounts Allocations Committee was established in 1982 to help in the distribution of monies to the three tiers of government from the federation account.
It came as an act of Parliament that prescribed the basis for distribution of revenue accruing to the federation account between the federal, state and local government councils in the state.
According to Act setting up FAAC, “the amount standing to the credit of the federation account, less the sum equivalent to 13 per cent of the revenue accruing to the federation account directly from any natural resources as a first line charge for distribution to the beneficiaries of the derivation fund in accordance with the constitution……..” Under the arrangement, the federal government gets 56 per cent, states get 24 per cent, and local government councils get 20 per cent.
However, over the years, the sharing formula has been rearranged into 56 per cent to the federal government while the states get 44 per cent as the states and local government operate a joint account.
A recurring decimal Over the years, stalemate from FAAC meeting is no longer news to Nigerians, what is, however, news is the reason for the stalemate.
And most times, it had to do with under-remittance by the state run oil corporation (NNPC).
It will be recalled in September of 2013, the Committee could not convene to distribute monies to the three levels of government twice because “there was no money to share.” With the coming of President Muhammadu Buhari in 2015, Nigerians expected that the issues that had always resulted to stalemate of the Committee’s meeting would be a thing of the past.
Situation gets worse In the history of FAAC meetings, there has never been such amount of deadlock from its meeting.
While in the whole of 2013, there were only two postponements, in the first six months of 2018, there have already been 5 postponements notably in March, April, June and July.
Fast forward to November, 2017, FAAC failed to conclude its meeting due to what was described as discrepancies in revenue figures presented to the committee by the Nigerian National Petroleum Corporation.
Adeosun speaks On June 28, a day after the Committee meeting could not hold, the Minister of Finance, Kemi Adeosun, confirmed that the meeting ended in a deadlock.
According to her, the meeting could not hold because figures presented by NNPC were unacceptable to all the parties.
Speaking after a National Economic Council (NEC) meeting in Abuja, the Minister explained that said that “some of the costs could not be justified, and so we have decided that rather than approve the accounts, we will go back and do further work.
We operate NNPC as a business.
We have invested public capital in that business and we have expectations of returns and when that falls lower than our expectations, then the owners of the business, which in this case is the Federal Government and states, need to act.” Why always NNPC? Many FAAC meeting that have failed to hold have been because of under remittance or to put it more mildly discrepancies in amount proposed by NNPC to be remitted to the federation account.
There was a time that the NNPC for 67 consecutive months, paid additional N6.33 billion into the federation account to offset its indebtedness of about N450 billion to the Committee.
The payment commenced in September 2011 after auditing of the accounts of the oil firm showed that it had been under remitting to the federal government.
However, in the latest twist, NNPC says its remittance of N147 billion to FAAC in June is in line with the agreement it reached with the governors on the matter.
The Corporation, in a statement issued by its Group General Manager, Group Public Affairs, Mr.
Ndu Ughamadu, explained that the agreement with the governors was that the corporation would make a monthly remittance of N112 billion to FAAC subject to sufficient funds from sales of domestic crude oil allocation for the corresponding month after meeting cash call obligations on JVs, deductions of Premium Motor Spirit (PMS)-cost under recovery and pipeline maintenance.
According to NNPC, it was able to surpass the terms of agreement with the governors on the monthly remittance for the month of June by N35 billion, having taken a cue from their postures by taking from the sum meant for settling cash call obligations.
The Corporation regretted the governors’ additional request of N40 billion, saying it was unfortunate, given the fact that the Corporation is set to exit the cash call phenomenon.
Implications According to a report by the Nigerian Extractive Industry Transparency Initiative (NEITI), 14 states in the country would be unable to function if they do not get the monthly allocation.
And this is evident as the present stand-off between FAAC and the NNPC has led to the inability of some states to meet their financial obligations.
Reports say not less than 14 states currently owe workers’ salaries for June, following delay in disbursement of funds from the centre.
The situation has also been made worse by poor internal revenue generation (IGR) mechanism and over-bloated civil service structure put in place by some state.
Like the chairman of commissioners forum did reveal in an interactive session with journalists in Abuja “a few states were able to manoeuvre their way” and paid salaries.
Some of the states that are currently feeling the spillover effect of the FAAC-NNPC spat include Ondo, Ogun, Taraba, Kwara, Abia, Borno, Osun, Imo, Rivers, Oyo, Ekiti, Kogi, Benue, and Nasarawa.
Bayelsa state Governor, Seriake Dickson, had said that the NNPC should be held responsible if states are not able to pay workers salary for the month of June.
But an economist and policy analyst, Friday Efih, thinks otherwise.
According to him, the states no longer think because of the entrenched culture of tokenism in the country.
“Why would the states not think of ways of funding themselves rather than wait for the end of the month to fly to Abuja with their finance commissioner to collect their state allocation,” he asked rhetorically.
Analysts are of the opinion that there is the need to review the Constitution in such a way that will empower states to explore the minerals in their land.
“States should be able tap the mineral deposits in the state and pay royalties to the federal government, and there won’t be need to always run to Abuja every month.” Yunusa, who doubles as the Adamawa state Commissioner for Finance is even more worried by the stalemate.
According to him, the situation is an indication of an economy that is not stable.
“Which kind of economy are we running that the moment we can’t pay the salaries of civil servants everything is at a standstill,” he said.
Question mark remains Many continue to question the rationale behind the continuous reliance on oil to drive the economy.
Mr. Ekeneh Uwudi, a public affairs analyst, insists that there is need to review NNPC’s cost of doing business.
Others believe that the situation will not improve until NNPC is privatised and made to run like every other corporation.
But Yunusa thinks differently, saying that by the time the grey areas are sorted out, these stalemates shall be a thing of the past.

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